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November 29, 2006

Who Hired That Guy Again?

Morgan, Lewis & Bockius might be on the hook for as much as $280,000 in legal fees incurred by one of its former lawyers in a malpractice suit filed by a miffed ex-client.

In a partially published ruling Wednesday, Los Angeles’ Second District Court of Appeal ruled that state Labor Code §2802 requires employers “to indemnify employees for expenses or losses incurred in direct consequence of the discharge of their duties.”

While Ralph Cassady worked for Morgan, Lewis & Bockius for only 13 months, the court held, the Philadelphia-based firm cannot ignore its duties to him as a former employee, even though Cassady represented angry client Rallie Rallis before and after he left the firm.

The court, however, did limit the firm’s obligation.

“The plain language of section 2802,” Justice Richard Aldrich wrote, “makes clear that Morgan Lewis is responsible for indemnifying Cassady, if at all, only for those defense costs arising from aspects of Cassady’s representation of Rallis undertaken during the period Cassady was employed by Morgan Lewis.”

In his complaint against the firm, Cassady estimated its obligation at about $280,000.

The ruling, in which Justices H. Walter Croskey and Patti Sue Kitching concurred, affirms an order granting Cassady a new trial on his indemnification claims.

According to Wednesday’s ruling, Rallis, an officer, director or shareholder in several corporations and business entities, had been a client of Cassady’s for nearly 25 years. Nonetheless, in 1995 Rallis sued Cassady, Morgan, Lewis — which employed Cassady as of counsel from Feb. 1, 1987, to March 4, 1988 — and other firms and attorneys associated with Cassady for alleged legal malpractice and professional negligence.

Specifically, Rallis accused Cassady of mishandling several negotiations and transactions between 1984 and 1993.

Morgan, Lewis retained L.A.’s Sheppard, Mullin, Richter & Hampton to defend it against Rallis’ claims, but chose not to provide a defense for Cassady, who had retained his own counsel.

In July 2002, however, Cassady sued Morgan, Lewis, seeking to enforce his rights under state labor laws and to have the firm indemnify him for the legal costs he piled up defending himself.

Los Angeles County Superior Court Judge John Shook originally granted Morgan, Lewis summary judgment, but he later reversed, saying a triable issue of fact existed as to how attorney fees should be apportioned. Shook granted Cassady a new trial.

In affirming on Wednesday, the Second District ruled that the fact Cassady had worked for more than one employer during his representation of Rallis “should not dilute his right to indemnity for costs incurred in direct consequence of the discharge of his duties at Morgan, Lewis.”

However, the court went on to say that Cassady — whom State Bar records list as a principal in L.A.’s Cassady Corp. — bears the burden of proving which part of the fees and costs Morgan, Lewis should cover.

“Cassady, far better than Morgan, Lewis, knows what professional services he performed for Rallis during which time periods,” Justice Aldrich wrote, “and has better access to the relevant evidence.

“Morgan, Lewis,” he continued, “is especially unlikely to have ready access to information or evidence about what services Cassady performed for Rallis during periods when Cassady was not employed by Morgan, Lewis.”